The hospital business

 At least a fifth of America’s hospitals are now run for profit. Private-equity investment in health care has tripled since 2015. Nevertheless, hospitals are closing at the rate of about thirty a year. What's wrong with this picture?

The idea of hospitals turning profits is somewhat recent. The oldest hospital—co-founded by Benjamin Franklin—opened in Philadelphia in 1795. Care was free (costs were covered by philanthropy and taxes). The cost of hospital care rose significantly after the second World War, partly because of the development of expensive procedures and partly because the government began to offer tax breaks for employers who paid for their workers’ health benefits. In 1965, after Medicare and Medicaid came into being, the number of insured Americans grew to more than sixty percent of the population. To capitalize on the boom, for-profit hospitals sprang up and more than seven hundred for-profit insurance companies were offering medical coverage. 

Since 2008 American hospitals have been involved in more than a thousand mergers and acquisitions, resulting in large, powerful health systems that influence both the price of hospital care and the reimbursement rates paid by private insurers. Last year sixty-six billion dollars was spent on acquisitions, a situation that has led to increased price hikes and unnecessary procedures. 

For hospitals, the most lucrative business comes from privately insured patients seeking specialized care. If your hospital is in an area where relatively few privately insured patients reside, it may be doomed. Where I live, the conglomerates have taken over. My hospital is currently undergoing a $360 million dollar renovation. Looks like business is good.

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